CALIFORNIA LEAVIN’

April 10, 2008

It takes a lot of public policy folly to persuade people to pack their bags and abandon California's sunshine, 70-degree weather, scenic mountains, and beaches, but, lately the politicians in Sacramento have proved themselves up to the task, say Arthur Laffer and Stephen Moore in their study, "Rich State; Poor States."

Major findings:

The latest Census Bureau data indicate that in 2005, 239,416 more Californians left the state than moved in; this was also the case in 2003 and 2004.

The native-born outmigration flows have become so systematic that the cost to rent a U-Haul to move from Los Angeles to Boise, Idaho is $2090 -- or some six times more that the cost of moving in the opposite direction.

What\'s gone wrong with the Golden State? A big part of the story is a tax and regulatory culture in Sacramento that treats rich people as if they were cash dispensing ATM machines, say Laffer and More. The cost for businesses of complying with California's rules, regulations, and paperwork is more than twice as high as other states. But the real growth killer is California's steeply "progressive" income tax with 10.3 percent rate applied to high-income residents -- the highest in the nation outside New York City.

The richest 10 percent of earners pay almost 75 percent of the income tax burned in the state.

Most of these "evil rich" are small business owners, i.e. the people who create jobs.

This has all been tragic because California has traditionally been a high-growth state -- though there has been much volatility. During certain periods, personal income in California surges, while at other times California's growth lags behind the nation's. From 1975-1978 personal income growth in California exceeded the average U.S. personal income growth by nearly 28 percent, say Laffer and Moore.